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Banks have earned US$250m in
investment banking fees in the
kingdom so far this year, already
the third best year on record
and almost double what they
made in 2017, according to
2ElNITIVûDATAû4HEûBESTûYEARSû
were 2007 and 2008, when
banks took home US$388m and
US$293m, respectively.
Banks have been paid
US$2.7bn in investment
banking fees in Saudi Arabia
since 2000, the data show. That
has included US$1.4bn for
arranging syndicated loans,
US$607m for equity capital
markets work, US$260m for
debt underwriting and
US$393m for M&A advisory.
HSBC and JP Morgan have
been the top fee earners, but
dozens more have earned over
US$10m from Saudi business.
Of the US$1.9bn paid to banks
since 2008, HSBC has received
US166m, according to the
2ElNITIVûDATAû3AUDIû"RITISHû
Bank (SABB), of which HSBC
owns 40%, received another
US$55m.
JP Morgan has received
US$109m since 2008 and
#ITIGROUP û'OLDMANû3ACHS û
Credit Agricole, Standard
#HARTEREDûANDûSOMEûLOCALûlRMSû
such as SABB and Riyadh Bank
have also fared well.
Japan’s Mitsubishi UFJ
&INANCIALû'ROUPûHASûBEENûPAIDû
US$71m in the last seven years
and other Japanese and Chinese
banks such as Mizuho and ICBC
have also become more active in
the region in recent years.
Asian banks could step in to
replace Western institutions if
the situation deteriorates, some
bankers said.The investment banking
fees also only represent part of
the overall pie on offer in
Saudi Arabia. Overseas banks
also have corporate banking,
wealth management and some
retail operations.
(3"# ûFORûEXAMPLE ûHASû
AMASSEDû53BNûINûPROlTSûINû
Saudi Arabia since 2008,
which includes US$3.4bn
booked through SABB, an
associate that was formed in
1978.HSBC started booking all its
3AUDIûPROlTSûTHROUGHûITSû
corporate centre in 2015, but
before that a breakdown of
PROlTSûINûTHEûKINGDOMûSHOWEDû
about half came from its
investment bank.ARAMCO DOUBTS
Many banks have been ramping
up their Riyadh operations and
updating their licences in recent
years in the hope of winning
business from Saudi Arabia’s
Vision 2030 plan – a set of
targets to improve the economy
and reduce reliance on oil.
“People have been aware of
the carrots and been building
EXPOSUREûOVERûTHEûPASTûTWOûTOû
three years, without necessarily
seeing an immediate return on
investment,” one senior banker
said.
Banks have committed
US$27bn to Saudi Arabia this
year via two jumbo syndicated
loans for the kingdom and PIF.
The big prize is winning a
role on the IPO of Aramco,
although that deal has been
repeatedly pushed back. Crown
Prince Mohammed bin Salman
now says Aramco’s stock market
debut will take place by early-
payment obligations for the
hidden debt. The central
government frowns on the use of
budgetary funds to directly bail
out local government SOEs and
WOULDûHOLDûOFlCIALSûPERSONALLYû
responsible for such actions,” Lu
said. “As such, there’s little
chance of another round of debt
swaps, as seen in 2015–2018, to
convert the hidden debt into
government bonds.”
A credit squeeze due to
China’s deleveraging campaign
has made it more challenging
FORû,'&6SûTOûRElNANCEûTHEIRû
debts. But so far, no offshore
,'&6ûBONDSûHAVEûDEFAULTED
QINGHAI PROVINCIAL INVESTMENT
GROUP, which S&P downgraded to
B+ last month due to rising
RElNANCINGûRISK ûMANAGEDûTOûREPAYû
US$300m of offshore bonds due on
September 26, but whether it will
be able to meet the redemption of
another US$300m of bonds due in
$ECEMBERûISûSTILLûINûQUESTION
A banker at a Chinese bank
SAIDûTHEûDEFAULTûRISKûOFû,'&6S ûATû
least, was lower than it was in
THEûlRSTûHALFûOFûTHEûYEAR ûAFTERû
the Chinese government shifted
towards a more accommodative
policy stance in July.
“Many local branches were
not allowed to renew their loan
facilities or grant new loans to
THEIRûCLIENTS ûINCLUDINGû,'&6S ûINû
THEûlRSTûHALFûDUEûTOûTHEûTIGHTû
control of headquarters. But this
HASûCHANGEDûAFTERûlNANCIALû
institutions were guided to
ENSUREûTHATû,'&6SûREASONABLEû
lNANCINGûNEEDSûAREûMETûINû*ULY vû
the banker said.LOCAL BANK SUPPORT
He cited Weifang Urban
Construction’s US dollar bond
OFFERINGûASûANûEXAMPLEû4HEûDEALû
was heard to be mostly
supported by Chinese banks,
whose local branches have
banking relationships with theISSUERû4HATûALSOûEXPLAINEDûWHYû
,'&6ûDOLLARûBONDSûCOULDû
continue printing in such a
weak market.
h-ANYû,'&6ûDEALSûPRINTEDû
recently were more or less the
same cases, as the gap between
the yields the issuers and
investors were looking for was
so big. Hence, these kinds of
deals can only rely on the
support from relationship
banks,” he said.
h&ORûLOCALûBRANCHES û,'&6SûAREû
already among the biggest
corporates within their cities or
counties. If they can’t do
BUSINESSûWITHû,'&6SûORûINVESTûINû
THEûBONDSûOFûTHESEû,'&6S ûWHATû
can they do?” he said.
The banker said his bank may
STILLûBRINGûSOMEû,'&6ûISSUERSûTOû
the market this year before
their offshore debt issuance
QUOTASûEXPIREû(OWEVER ûHEûSAIDû
his bank will only concentrate
on investment-grade issuers,given that it has become “very
HARDûTOûPUSHûNON
)'û,'&6û
deals”.
-EANWHILE ûTWOûOTHERû,'&6Sûnû
CHANGDE URBAN CONSTRUCTION AND
INVESTMENT GROUP (rated BBB– by
Fitch) and LIUZHOU DONGTONG
INVESTMENT & DEVELOPMENT (rated
BB by Fitch) – kicked off
roadshows last week for planned
US dollar bond offerings.
A banker from a Chinese
brokerage who had helped to
ARRANGEû,'&6ûBONDûROADSHOWSû
last week said it was hard to say
whether the deals, especially
NON
)'ûISSUES ûWILLûBEûLAUNCHEDû
in the near future.
“We’re still awaiting
investors’ feedback. We know
that foreign investors’ interest
INû,'&6ûBONDSûISûVERYûLOW ûBUTû
onshore clients, mainly banks,
still have interest in US dollar-
denominated assets, given the
depreciation of the renminbi,”he said. (^)
Source: Refinitiv data
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Saudi
British
Bank
Riyadh
Bank
Banque
Saudi
Fransi
Cr StanChartMUFG
Agricole
HSBC JPM Citi Goldman
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
US$m
FEES EARNED BY BANK 2008-PRESENT